Goldman Sachs More Than Doubled Muni Exposure in 2010

Goldman Sachs’ trading desks owned nearly twice as much municipal debt at the end of 2010 as they did at the end of the previous year, according to the company’s annual report.

Goldman says it owned muni debt worth $359 million that it categorizing as “assets available for sale” as of December 2010. The previous year it had just $182 worth of muni debt.

This far outpaces the growth of muni bond issuance for the year. For the full year 2010, long-term municipal issuance volume was 5.7 percent above 2009’s levels, according to SIFMA.

What’s more, it suggests that Goldman is betting against the muni panic. Investors withdrew over $20 billion in the last two months of 2010. Goldman shows no signs of a similar sell off. If they did sell munis in the last two months, this would imply their accumulation of munis in 2010 was improbably higher than 100 percent. It’s far more likely that Goldman was buying into the weakness at the end of 2010.

Goldman’s head of muni research, David Alter, told investors that the company does not “believe the US will see a significant increase in defaults at the state or local government levels.”